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Legislation Tracker: All for adjudication and adjudication for all?

  • United Kingdom
  • Construction and engineering
  • Litigation and dispute management

05-02-2018

Mr Justice Coulson has once again hit out at the “jurisdictional obstacles” created by the exclusions from the definition of “construction operations” under the Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act”).

HHJ Coulson’s comments were made in the decision of Severfield (UK) Ltd v Duro Felgura UK Ltd[1], which he handed down on 29 November 2017.  This was not the first time that HHJ Coulson had come across this particular case, having previously dealt with an application for summary judgement in respect of the final account in 2015. That application had followed earlier adjudication enforcement proceedings, which had been refused by Mr Justice Stuart Smith in June 2015.  Mr Justice Stuart Smith refused enforcement because the adjudicator’s decision had decided various aspects of the claim which were excluded operations under the Construction Act.

In HHJ Coulson’s first judgement[2], he noted that:

All of the difficulties, in both the old and the new proceedings, can be traced back to s105 of the 1996 Act and the legislature’s desire to exclude certain industries from adjudication”.

s105(2) of the Construction Act excludes the following operations from the definition of “construction operations” and therefore from adjudication proceedings:

“(a) drilling for, or extraction of, oil or natural gas;

(b) extraction (whether by underground or surface working) of minerals; tunnelling or boring, or construction of underground works, for this purpose;

(c) assembly, installation or demolition of plant or machinery, or erection or demolition of steelwork for the purposes of supporting or providing access to plant or machinery, on a site where the primary activity is—

(i) nuclear processing, power generation, or water or effluent treatment, or

(ii) the production, transmission, processing or bulk storage (other than warehousing) of chemicals, pharmaceuticals, oil, gas, steel or food and drink;”

The decision to exclude the above specific sectors of the construction industry from the ambit of the Construction Act was made because Parliament’s view at that time was that these sectors were “operating satisfactory contractual arrangements concerned with payment” and therefore would not benefit from the adjudication process, which was viewed as a “punishment”. When faced with this justification of the exclusions, Coulson suggested that “both of these underlying assumptions were, and remain, misconceived” and called for the “blessing” of the right to adjudicate “to be conferred on all those industries (such as power generation) which are currently exempt”.

Unsurprisingly, when faced with further proceedings on payment issues between the same parties (with a Defendant Employer which had gone into liquidation without making any payments to the Claimant Contractor), HHJ Coulson once again expressed his concerns at the “injustice” caused by the “exceptions, casually introduced by Parliament without any serious debate” 

Whilst the issues before HHJ Coulson were not impacted by s105(2) of the Act, the reason for the delays to the Claimant obtaining an order for any sums payable, and the fact that an the order was only being obtained after the Defendant had entered liquidation, were. In light of this, HHJ Coulson referenced his earlier decision and disparaged “Parliament’s insistence on the exceptions (and its refusal over may years to remove them)”.

Coincidentally, in November 2017 the Department for Business, Energy and Industrial Strategy commenced a consultation as to the effectiveness of the “2011 Changes To Part 2 Of The Housing Grants, Construction And Regeneration Act 1996”.  Although s105(2) of the Construction Act does not form part of the changes introduced in 2011, as the consultation considers the effectiveness of adjudication it will be interesting to see whether this specific issue is raised in response to any of the questions which seek to address the extent to which the existing construction payment and adjudication framework generally is working”.

Responses to the consultation are required by 19 January 2018 and the outcome will then be published within 12 weeks. Watch this space!


[1]                [2017] EWHC 3066 (TCC)

[2]                [2015] EWHC 3352 (TCC)

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